Economics at your fingertips  

An analysis of key factors of financial distress in airline companies in India using fuzzy AHP framework

Umesh S. Mahtani and Chandra Prakash Garg

Transportation Research Part A: Policy and Practice, 2018, vol. 117, issue C, 87-102

Abstract: The aviation industry in India is on a growth path with annual passenger traffic growing at over fifteen percent. The government has backed this growth through the extensive development of airport infrastructure across the country. However, airline companies in India, periodically face financial distress as the internal and external environmental factors change dynamically. Company management, acting as the agent for all the stakeholders, needs to ensure that the distress condition does not develop into a bankruptcy situation. It needs to identify all those factors, which have a major impact on the financial condition of the company and monitor them continuously using various tools and techniques. These identified key factors could be from both the internal conditions of the company and from the external environment that the industry operates. By identifying these influencing factors early, management can take preventive measures before the distress condition becomes critical. Informed decisions can be taken when the value of these key parameters change over time. To identify and rank these key factors in terms of relative importance, this paper adopts a multi-criteria decision making (MCDM) approach based on the technique of fuzzy Analytical Hierarchy Processing (AHP). Robustness of the method is further tested through sensitivity analysis. The study finds that financial factors are the most critical and categorized as a major influence on the commercial stability of the airlines. Among these, operating revenue per air kilometer is the key variable for this sector. Operational factors, which are an indicator of the capacity and cost structure of the company, are ranked next, with the load factor taking the highest rank in this category. From the external environment aviation, fuel price per liter is ranked highest among all the factors and has a major impact on the profitability of the airline in India. Results also show that annual inflation and GDP growth rate in the country has a major influence on the sustainability of the airlines in India.

Keywords: Ratio analysis; Financial distress; Airlines; Fuzzy AHP; India (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from
https://shop.elsevie ... _01_ooc_1&version=01

Access Statistics for this article

Transportation Research Part A: Policy and Practice is currently edited by John (J.M.) Rose

More articles in Transportation Research Part A: Policy and Practice from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

Page updated 2018-11-10
Handle: RePEc:eee:transa:v:117:y:2018:i:c:p:87-102